1. Field of the Invention
The present invention relates to importing and exporting and, more particularly, to a method, apparatus and free trade qualification system for determining whether goods intended for import or export across jurisdictional boundaries qualify for one or more trade agreements.
2. Description of the Related Art
The importing and exporting of goods across jurisdictional boundaries, such as between states or nations, is a well-known phenomenon. As a result of increased globalization and the rise of multinational corporations, the trade in goods across borders continues to grow and accelerate. For individual companies the ability to control the total landed cost involved with each transaction is key to success in this arena, as is the ability to ensure that they are in compliance with the myriad laws and regulations governing the international trade process.
Under bilateral and multi-lateral free trade agreements any product manufactured in one or more countries that are party to such an agreement may be traded duty free between all member countries. For manufacturers of products, tariff preference under one of these agreements can be worth millions of dollars and it is critical that accurate assessments are made.
With increased globalization and competition, companies cannot afford to not take advantage of trade agreements, mainly free trade agreements. Even small and mid size companies have started taking advantage of free trade agreements and the number will increase as companies increase the usage of preferential trade agreements in future. Among larger companies. a broader range of industries are using or are planning to use free trade agreements. Previously, only large companies were working under free trade agreements. Now that segment has expanded to include an array of other industries and will continue to grow.
Free trade agreements have extensive rules and regulations that must be followed to determine if a particular product may be considered compliant and thus qualify for trade with eliminated or reduced tariffs. These rules of origin take into account where goods are produced, what materials are used to produce them, and costs associated with the materials and their processing. Only goods that qualify under the rules of origin for a particular free trade agreement can obtain tariff preference under that agreement.
In addition to several such basic rules to determine “originating” designation, there are a large number of exceptions and special conditions that need to be considered before a decision can be made regarding the eligibility of the finished product. In addition, the products involved could include thousands of components, each of which in turn can be broken down further into multiple levels of subassemblies and individual components. Presently human specialists review the bill of materials (BOM) of the products to determine if it qualifies. Even with such experts this takes an inordinate amount of time, sometimes months, for complex products.
Automation of this process, if sufficiently accurate and efficient, would be of great value to companies engaged in international trade, especially those dealing with complex products with many parts or ingredients. However the very complexity that would make automation valuable also makes the requisite level of performance difficult to obtain under standard practice methods.
The main problem involves the method of representing the bill of materials. Two methods are usual when using bills of materials in other business operations such as manufacturing. The first method represents the BOM structure using typical relational hierarchy with tables representing each level of the BOM. This method can be used only for finite Bills of Material. Another method is to represent the BOM using two tables. The parent table represents the finished good (or sub-component) and the child table representing the commodities/parts/raw materials and quantities used to make up the finished good (or sub-component). The first method greatly limits the ability of the process to represent the bills of materials of the very complex multi-component products for which automation would be most useful. The second method, though somewhat more flexible, still carries a certain amount of redundancy and is very slow to process.
Accordingly, it is desired to provide a method and system required to change the presentation of bills of materials which addresses several problems inherent to standard bills of materials presentation.